Appeals court stymies bid to regulate high cost of prison phone calls

ABA Journal

BY LORELEI LAIRD

MAY 2018

Hidden among the corporate reports and bureaucratese in Federal Communications Commission docket No. 12-375 are letters from prison inmates and their families, pleading for relief from high phone rates. Amsani Yusli, whose testimony was submitted in 2015 by the Campaign for Prison Phone Justice, wrote that one 20-minute call per day from her husband cost $130.20 per month.

“This amount translates to groceries for the month,” she wrote. “When you don’t have much, you have to choose between feeding your kids ... and allowing your kids to know their father.”

After 14 years of such pleas, the FCC in 2015 made a rule capping rates for in-state prison phone calls. But the affected telecommunications companies sued—and in June 2017, the U.S. Court of Appeals for the District of Columbia Circuit handed them a victory in Global Tel-Link v. FCC. The court said the FCC overstepped its statutory authority when it regulated in-state calls, and that the way it set the rates was “hard to fathom.”

To make matters more interesting, the court reached that conclusion without help from the FCC. Six days before oral arguments, the agency abandoned parts of its own defense, conceding oral argument time to a class of inmates and their families who’d intervened in the case. Advocates for prisoners say that unusual circumstance helped undermine the FCC’s case.

As a result, they say, about two decades of efforts to address high inmate calling rates are back to square one.

“Prisoners and their families are getting ripped off, plain and simple,” says Andrew Schwartzman, an attorney for the intervenors and the Benton Foundation senior counselor at the Georgetown University Law Center’s Institute for Public Representation.

LEGITIMATE COSTS

Opinions differ on why inmate calling rates are so much higher than those in the free world. The prison telecoms and their corrections agency clients say it’s because extra costs such as monitoring phone calls are associated with serving prisons.

But inmate advocates say the real driver of costs is “site commissions,” an industry practice in which telecoms pay a percentage of their revenues to corrections agencies. These range from 20 to 88 percent of revenues, and their size influences the agencies’ choice of contractor.

In exchange, the telecom gets a monopoly within the prison, which allows it to recoup its profits with high rates. Inmates and the people they call have no other choice, so they either pay those rates or forgo phone calls.

Paul Wright, executive director of the Human Rights Defense Center, says that’s bad for society. He cites studies showing that maintaining contact with loved ones on the outside helps prisoners stay out of trouble once they’re released.

“The people running the prisons and jails ... know all this, and they just make the decision to take the kickback money and run with it—and public safety and sound public policy be damned,” says Wright, a former jailhouse lawyer.

The FCC cited that research when it capped calling rates. The agency intentionally set those caps too low to account for site commissions, saying they’re not a cost of providing phone calls. Rather, they’re “location rents” similar to paying for the right to locate a pay phone in a high-traffic area, which the FCC has found is not a cost of doing business.

In setting the in-state caps, the FCC also reached into unfamiliar regulatory territory. Federal law expressly gives the FCC no right to regulate intrastate calling unless Congress says otherwise.

Therefore, the agency relied on Section 276 of the Telecommunications Act of 1996, which requires the FCC “to ensure that all pay phone service providers are fairly compensated for each and every completed intrastate and interstate call.” This language was intended to stop undercompensation of local pay phone companies—but the commission said it also could prevent overcompensation.

This provoked a sharp dissent from Ajit Pai, then an FCC commissioner, who wrote in 2015 that the agency was overstepping its authority. That became important in January 2017, when President Donald Trump nominated Pai as the FCC chairman.

Under the new leadership, the FCC declined to defend its position on Section 276, instead conceding 10 minutes of oral argument time to the intervenors. That letter was sent six days before oral argument, requiring Schwartzman of the Georgetown University Law Center to prepare at the last minute.

It “raised an unnecessary and very high hurdle for any advocate to clear,“ says Lee Petro, another attorney for the intervenors and of counsel at Drinker Biddle & Reath’s Washington, D.C., office.

Indeed, the opinion was bad for the FCC, particularly on site commissions. On that issue, the District of Columbia Circuit blasted the FCC, saying site commissions “obviously are costs of doing business” because many corrections agencies won’t award contracts without them.

“On the record before us, we simply cannot comprehend the agency’s reasoning,” the court wrote.

Michael Kellogg, an attorney for the prison telecom companies, declined to comment for this article. But Schwartzman says this point of view ignores past FCC decisions.

“Historically, if somebody paid the owner of a 7-Eleven to place a pay phone in the store, the rent that was paid to the owner of the 7-Eleven was considered part of the profit of the phone call,” Schwartzman says. “That’s the way the FCC has historically viewed it, and the court didn’t accept that.”

The court was less flabbergasted, but no more favorable, about the FCC’s authority regarding intrastate calling. Over a dissent by Judge Cornelia Pillard, it found that the “fairly” language in Section 276 doesn’t give the FCC clear authority to ensure fairness to consumers.

Petro of Drinker Biddle says this ignores about two decades of FCC jurisprudence on fairness, a term of art from the Communications Act of 1934’s requirement that rates be “just, fair and reasonable.” After the 1996 act, he says, the FCC spent a lot of time interpreting the disputed section and decided that fair means “fair for both parties to the transaction.”

But Mithun Mansinghani, the Oklahoma solicitor general and author of an amicus brief supporting the telecom companies’ position, says some of the same cases support the narrower, providers-only interpretation of the statute’s call for fairness

He notes that the 1996 act gave the FCC nine months to implement its fairness mandate. But it took more than 15 years for the commission to apply it to inmate calling rates.

“In implementing the statute, they never thought that what they were trying to do was prevent excessive compensation to pay phone providers,” Mansinghani says. “This was something that was just dreamed up a couple of years ago.”

DEFERENCE DISPUTE

Under normal circumstances, a federal appeals court confronted with an ambiguous statute might defer to the expertise of the federal agency whose job it is to make rules based on that statute. That’s Chevron deference, an established principle of administrative law.

But because the FCC abandoned its own defense on the question of how to interpret fairly, the District of Columbia Circuit found that Chevron deference didn’t apply. The intervenors argued, when petitioning for en banc review, that this wasn’t warranted because the FCC never formally changed its position.

The majority quickly issued a clarification saying it would have decided the same way using Chevrondeference, and the full District of Columbia Circuit denied a rehearing. But the issue might come up again. The intervenors appear to be planning a petition for a writ of certiorari.

The campaign to lower prison calling rates is alive in other areas. Certain issues were remanded to the FCC, which could set off another round of litigation about new rules. At least two class action lawsuits about the high cost of calls from prison are pending.

Although the current Congress is unlikely to give the FCC more regulatory authority, activists may look to state legislatures, which can ban site commissions—and have, in at least eight states.

Wright of the Human Rights Defense Center thinks public opinion would support that if the issue were more widely understood.

“We’re talking about 25 or 35 cents a minute, $15 for a 10-minute call,” he says. “No one [else] in America pays anything remotely close to that.”